-The economic benefits of financial integration have been recognised by successive European Councils, and facilitating the integration process has been established as a priority of economic reform. This priority is reflected in the deadline of 2005 set for implementing the FSAP as the blueprint for an integrated EU financial system. However, progress in implementing the FSAP has been slow and risks being even slower in the context of slow economic growth and an uncertain financial environment in the coming year. Against such an unfavourable background, it is clear that any weakening in the commitment of Member States to the integration process would be likely to undermine financial-market confidence. Three main lines of action can be identified as a means to reassure financial markets.
First, there is a need to accelerate the implementation of the FSAP so as to ensure that the Lisbon deadline is respected.
Second, the adoption of the Lamfalussy proposals on the regulation of EU securities markets is an essential step in accelerating implementation of the FSAP.
Third, some issues relating to arrangements for cross-border financial supervision should be resolved. The higher systemic risk associated with financial-sector integration and consolidation points to a need for close co-operation among national supervisors and the central banks in preventing and managing financial crises. Accordingly, the recommendations made in the EFC Reports on financial stability should be implemented in full and as rapidly as possible.
The introduction of the euro has established a single currency but without a single financial market. Accordingly, the potential of the euro has not been exploited to the full. The process of EU financial integration has been underway since the mid-1980s, but is far from complete. Much remains to be done if the economic benefits of a truly integrated EU financial system are to be realised.
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